The 2001 Tax Act creates a new deduction for education

The new tax law provides taxpayers with a new deduction for qualified higher education expenses.  If you qualify for this deduction, you can take it "above the line."  This means that you can take the deduction even if you don't itemize your other deductions.

The deduction applies to tuition and fees spent for you, your spouse, and your dependents to attend school at a qualified higher education institution.  The deduction amount is limited to $3,000 for 2002 and 2003.  The deduction is limited to $4,000 for 2004 and 2005.  This tax break ends after 2005.

There are income limits that apply to this tax deduction.  In 2002 and 2003, you can't take the deduction if you're single and your income exceeds $65,000 or if you're married filing a joint return and your income exceeds $130,000.  In 2004 and 2005, you will get at least part of the deduction (up to $2,000) with income as high as $80,000 for singles or $160,000 for marrieds filing jointly.  There is no deduction allowed beyond these income levels.